Buying A Home

8 Things You’ll Need To Do Before Purchasing A House

Written by Kristie McCauley

Buying a home is one of the biggest financial decisions that you make in a lifetime. It can be both rewarding and challenging to be a homeowner. It can really help you to get off on the right foot if you take these seven steps prior to buying a home.

1. Know How Much You Can Afford

You have to consider the total cost of owning a home before deciding how much of a purchase price you can afford. It’s the mortgage payment (including principal and interest), real estate taxes, homeowners association fees (if applicable), and some money set aside for anything that could (and probably will) go wrong on a monthly basis.

A real estate agent or mortgage loan officer can help you determine how much of a home you can afford. Do keep in mind, however, that mortgage lenders do not take ALL of your expenses into consideration when telling you how much of a mortgage (and how much of a home) you can qualify for.

So even if they tell you that you can qualify for a million dollar mortgage, it doesn’t mean you can actually afford to make that monthly payment. Mortgage companies consider your gross income and do not include expenses such as insurance, your monthly grocery bill, and gas as part of your expenses.

You, however, have to include these expenses to realistically decide if that million dollar mortgage payment is feasible.

2. Pull Your Credit Report

Pull your credit report from each of three credit bureaus. Your credit needs to be in tip-top shape when it comes time to apply for a mortgage. Great credit or bad credit can make a huge difference in the terms and conditions you land for a mortgage.

It can affect the interest rate you pay, the amount of money you have to come up with for a down payment, and even the length of time you have to repay the mortgage loan.

3. Improve Your Credit

If you have any blemishes on your credit, work on fixing them now. Contact the bureaus to dispute and correct any inaccurate information. If you have collection accounts, late payments, or any issues, contact the creditors to work out arrangements to pay off and clear up these blemishes and increase your credit score.

Adopt good habits that directly help to improve your credit. Always pay your bills and always pay your bills on time. Avoid opening too many new credit accounts leading up to applying for your mortgage.

4. Save

Save, save, and then save some more. When you apply for a mortgage and when you buy a home, you’ll have to show that you have enough money in the bank for the down payment and to cover the closing costs.

5. Get Pre-Approved

Get pre-approved for a mortgage. Yes, you can get mortgage pre-approval without having a specific home in mind. You can go through the mortgage process so the loan officer processes your personal financial paperwork to pre-approve you for a maximum mortgage loan amount.

Pre-approval is a great bargaining tool when you are putting a bid in on a home.

Once you find a home, all you have to do is provide the house information. The mortgage loan officer will go through the rest of the mortgage process with the house—such as inspecting the home, appraising the home, etc.

Having pre-approval can help to speed up the buying process and the closing process.

6. Save More

Owning a home is about much more than being able to make the mortgage payment. When you rent, if something goes wrong with your house or apartment, you just dial up the landlord or management company and, voila, they send someone over to make it right.

When something goes wrong with a house that you own, guess who is on the hook for the cost of the repairs?

Yup, that’s right, you are.

In addition to saving money for your down payment and closing costs, it’s also a good idea to save for maintenance and home improvements.

7. Get a Grip

Sure, we all want to live in the fanciest house in the best neighborhood in town. Unfortunately, sometimes our reality is quite different from our wants.

Find homes that meet your financial abilities and that meet your needs. If you can find homes that also fit your wants, then that is a bonus.

Prioritize your needs and wants. The homes that meet all or the majority of your priorities and are also what you can afford should be the homes that you pursue.

8. Find a Realtor

There is a saying that goes something like, “If you think it’s expensive to hire a professional, wait until you hire an amateur.”

The great part about working with a Realtor when you’re buying a home is that it does not cost you a dime. The seller is responsible for paying the commissions for the real estate agents involved in the transaction.

So find a real estate agent that specializes in the neighborhood where you want to live or somehow meets your needs. They have access to listings and can provide you with invaluable advice. Especially, if you are a first time homebuyer, trust me when I say that you’re going to need all of the help and advice that you can get.

A professional can walk you through the steps of the homebuying process.

Buying a home is a huge emotional and financial step. Probably one of the biggest ones that you take in a lifetime. It’s a good idea to prepare yourself and get your financial affairs in order before you start the buying process.

About the author

Kristie McCauley

Kristie Lorette McCauley is an award-winning expert on personal finance, mortgages, and credit. She has published articles on major finance and credit blogs, such as Yahoo! Finance, Quizzle, Money Crashers, and BankRate. She is also the author of books, such as How to Use the Equity in Your Home or Business Today to Invest for Tomorrow and How to Open & Operate a Financially Successful Personal Financial Planning Business.

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